Investors to get tough on errant firms

Major City investors are promising there will be no more sitting on the sidelines while companies are run into the ground.

In the wake of criticism for failing to halt the reckless activities of big lenders such as Royal Bank of Scotland, investor bodies are trying to smarten up their act and come down hard on errant firms.

The Institutional Shareholders' Committee, comprised of the four main investor bodies - the Association of British Insurers, The National Association of Pension Funds, the Investment Management Association and The Association of Investment Companies - has drawn up a code of practice.

Taking control: The new code comes after Lord Myners urged investors to take a more active role

The aim is for investors to start tackling thorny issues, working
collectively with other institutions if they are struggling to make
their views heard. The code has the support of large stock market
investors such as Standard Life and Legal & General.

An ISC spokesman said: 'We want to have a grown-up
relationship with companies - not one like a junior preparatory school
dining table where the bread rolls are being thrown around.'

He pointed out that the bank crisis had forced some
soul-searching after it became obvious investors had not intervened to
the extent they should have done.

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He noted: 'It was very difficult for companies to really
engage RBS in proper dialogue. RBS was very defensive and very
determined.'

The ISC's code comes after the Treasury minister Lord (Paul) Myners urged investors to take a more activist role.

The ISC hopes that long-term shareholders, including pension
funds, insurance groups and some sovereign wealth funds, will sign up
to the voluntary code.

It wants fund managers to be clear about their responsibility
to engage with companies. If behind the scenes pressure on directors
doesn't work, investors will be encouraged to make public statements
and vote at agms.